tv Whatd You Miss Bloomberg February 23, 2017 3:30pm-5:01pm EST
lockheed martin. the president also took the opportunity to blast what he called unbelievably bad trade deals. he singled out the trade deficits with mexico and china. the presidents picked to be the u.s. ambassador to china is emphasizing the importance of friendship between the countries. terry branstad is preparing to meet with china's ambassadors during a trip to washington. he said, there have been a lot of rocky times between the united states and china, but he is hoping to play a constructive --e in hoping to approve improve the relations. former speaker john boehner says a full replace -- repeal and replace of the affordable care act is simply not going to happen. he spoke today at a conference in orlando. he called the rhetoric about a lightning fast passage of the new health care framework happy talk. he said any changes to obamacare would likely be revocable --
relatively modest. presidential counselor kellyanne conway told members of seatac -- cpac is a generous and decisive leader who brings compassion to the white house. of other females that a lot of women in the united states have a problem with women in power. news 24 hours a day, powered by more than 2600 journalists and analysts in over 120 countries. this is bloomberg. pimm: live from bloomberg's headquarters in new york, i am pimm fox. lisa: i'm lisa abramowicz.
joe: i am joe weisenthal. we are 30 minutes from the close of trading in the u.s. pimm: u.s. stocks, paring losses. the dow jones, poised for its 10th consecutive trading session of gains. lisa: president trump, summoning prominent ceos to the white house today. he said he plans to put them to work to restoring u.s. dominance in trade. also on the hill, treasury secretary steven mnuchin and says he is in no hurry to brand china a currency manipulator. his comments about extra long bonds are making waves in the bond market. puerto rico's governor will meet with the u.s. treasury secretary commonwealth's relationship with the new administration and how it plans to tackle its budget crisis. joe: let's look at where the major averages stand. bloomberg's abigail doolittle is standing by. abigail: we are looking at mixed
trading action for the major averages. the dow and s&p 500, modestly higher. the nasdaq has been lower all day, the laggard today, wade on by some chip stocks. both indexes have put in all-time highs, and the dow jones industrial average is on pace for yet another record close. the s&p 500's fractions away from potentially putting in another record close, but a bit of a bullish and mixed close for stocks as we head into the close. checks when asset we look at other asset classes to see if they confirm this mixed action, they do. it's a little bit more risk off then risk on. this is shown by the 10-year yield, down three basis points. we also have gold trading
higher, up more than 1%. we have the dollar falling against the yen. the yen is up a second day in a row. all of these safe haven assets are up two days in a row. it's sort of a contradiction to those all-time highs for the dow and s&p 500. as for what is helping the dow close at this record high in the record high we saw earlier, these are three of the top points for the dow, led by johnson & johnson, up more than 2%. we also have merck and pfizer trading higher. johnson & johnson, one of the company's executive vice president's, she spoke at an rbc capital conference, and she said they were looking for top and .eals around medical devices investors are liking the potential for m&a messages. another boost for the dow is verizon. this is an intraday chart, and we see the stock has gained steam all day. this could reflect the fact that the company has launched exponent, a new technology that
could accelerate growth. it iss what is looking -- looking like at the markets. we have a great chart that may suggest puerto rico's finances are improving. we are looking at general obligation bonds. those are bonds that are backed by the tax and credit power of a sovereign entity, and we see they are well off the lows, perhaps suggesting positive things are ahead for puerto rico. joe: the thanks, abigail. we will be hearing from the puerto rican governor later this hour. right now, press secretary sean spicer giving his daily press briefing, which you can watch right now on tv on the bloomberg, spicer making some headlines. trump says he will be talking about taxes in his speech next tuesday, also will address infrastructure in his forthcoming budget plan, promising a more accessible health plan. these are big things market people have been watching.
some of these things are expected to boost the economy and markets. the most anticipated ipos in a long time is finally inside. snap inc., the parent company of snapchat, filed its s-1. the company is hoping to achieve a valuation of over $20 billion, but our next guest is skeptical. he's a professor at nyu's's stern school of business, and in a recent blog post, he pegged the company at $14.4 billion. professor, thank you very much for joining us. that is still a lot of money, $14.4 billion, but why do you not put as high above valuation on the company as other investors would like to see? >> let's put it in perspective. the company has a half $1 billion in revenues and is losing more than half $1 billion. there are potential ways of getting to $25 billion or $30
billion. i think the odds of getting there are low. as an investor, you have to play the odds. it seems to me even if you bet on a successful company coming out of this process, you are already upping the ante and expecting it to be a super company. lisa: just taking a step back, how do you begin to evaluate a company like this where so much of the profitability is potential and unknowable. >> the first thing is psychological. you have to accept that every number you are going to estimate is wrong. it's not your fault. it's a fact that the market is changing. that said, you do have to make your best estimates. they might call themselves a camera company, but they are going to make money in online advertising. we know the size of that market. it is growing. lisa: how big is it? >> the total is about $60 billion.
online, $200 billion. half of the 200 billion, google and facebook already have. and the growth of that market, 75% of that growth went to google and facebook. can snap find a way to wedge itself in the market? that is a pretty big market. storyic valuation, the about snap ending up as a successful social media company, but not about facebook-like company, but a niche company that is interested in users going for the visual. that is my starting point. i am giving them a fairly successful future, but there are lots of things that can happen between now and 5-10 years from now. lots pimm: of things that can happen to everyone everywhere over the next five or 10 years. when you look at this ipo, don't you want to buy it if you are in this space. google,about facebook, maybe apple on the hardware side, but what else is there to
buy? the >> question is, what do you define as the spacey ec? if you want to get into the online advertising market, the question is, is snap the cheapest way of getting their? i'm not sure it is. i think i can get it cheaper with not just other social media companies -- pimm: but this is hot. this is going to garner so much attention. this is about the stock, not about the companies. in other words, when you are an investor, you don't have access to this is about buying the stock, not worrying about whether they are going to make money or not make money. >> i think the fundamental question you have to answer is, are you trading or investing? you bet on momentum. snap might be a great trade, but it might be a bad investment. what i did was a valuation of it
by a business. who cares what the value of the business is? it could start at $20 billion and end up at $35 billion. joe: one thing you noted in your blog post right off the bat that you found humorous was that snap calls itself a camera company, which you find weird. we don't think of camera companies being incredibly profitable. do you think that the purpose of from theo distract fact it's an online advertising business. they want to think they are in a new industry, but it's fundamentally another thing of getting eyeballs behind the ads. >> what i read that camera company to mean was that they are a visual company. videos, whichand is why they are attractive to 24-year-olds. they don't want to read people's writing about things. they want to see pictures and videos. i understand what they are aiming for, but i think it was
in artful to use the words camera company. that is not a business i want to attach myself to. joe: if people don't read, they are missing out on your post. the professor of finance at stern school of business, you're going to be sticking with us.we will also be talking about tesla. lisa: first, we will speak with lo.icardo rosel he will discuss with the treasury secretary his plans to tackle the budget crisis. this is bloomberg. ♪
washington correspondent kevin's are really is joined by governor rosello for an exclusive interview. kevin: thank you for being on bloomberg tv. my understanding is you were just at the department of justice, and tomorrow, you will be at the treasury department. tot are you communicating the trump administration officials? gov. rosello: today, we set up a arst step in executing federally-supported plebiscite supporting puerto rico so we can decide statehood and independence in puerto rico. in a broader sense -- gov. rosello: you submitted that paperwork aware? -- kevin: you submitted that paperwork where? gov. rosello: in the attorney general's office. one of the requirements was to submit that documentation over here, but we also want to let that ainistration know steps were taken in puerto rico. in the past 53 days, we have
enacted 14 bills, many of them pushing forward the agenda for fiscal responsibility and economic growth, and social well-being. we are a few days away from supporting the fiscal plan, so we are ready to present that to and excited to show our progress and let everybody know that there is a new dynamic. let's talk about that plan you will be making public on tuesday. -- kevin: let's talk about that plan you will be making public on tuesday. you've got tough choices to make with this plan, in particular if you are going to limit costs on health care. you are in m.i.t. guy. what is it going to be? what are you going to decide between? gov. rosello: it's about being smart. instead of just looking for somewhere to cut, it's about where we can find effective policy that will bring forth a better government.
let's talk about rightsizing government. to of the alternatives is reduce 35% of the workforce. that would have a devastating effect on the economy, an 8% to 10% reduction in the economy. puerto rico has a 131-agency structure. there's a great opportunity. let's reduce the size of government and make it work, be fiscally responsible, but also have a good output, good result. these are the strategies we are employing. there is kevin: a great chart on the bloomberg, showing the beginnings of what many folks would argue is an economic turnaround for puerto rico, but there is also that $7 billion shortfall, and in particular, couldlder who, in may, face new pressure on puerto rico to somehow pressure them.
how do you negotiate a deal with bondholders? what is around the corner for bondholders, and how are you going to navigate that relationship, especially when this plan comes out? gov. rosello: this plan is critical for that renegotiating effort. we have always had open lines of communication. we should with our willingness to pay that we don't want to go into a fault. if there's money available, we can pay that. kevin: do you need more concessions? is that what i'm hearing? gov. rosello: we need to sit down at the table and look at the numbers and get creative, look for different vehicles. i am all for that negotiation. with the bondholders didn't have in the past was visibility. they didn't have a willingness to pay. it was default, and that was it. what i want to do is sit down
with the reality we have in puerto rico and see if we can decide on a path forward that is a good alternative for all stakeholders. kevin: in the last administration, there was a democrat in the white house, former president obama. we also heard from some senate democrats in the last administration or congress in the united states about the potential for a bailout, that u.s. taxpayers would have to bailout puerto rico. it's a politically divisive issue in the united states. can you guarantee to u.s. taxpayers that there will not be a bailout utilizing their funds your administration? gov. rosello:gov. rosello: here is what we are doing. i wrote a piece in 2015 where i stated i did not want a bailout. i didn't want a bailout for puerto rico, but what we do need
is to establish collaboration. we are doing all the things we need to do in puerto rico. we passed labor reform in the first couple weeks of our government. we are didn't want a bailout for puerto rico, but what we do need is to establish collaboration. passing permit reform in puerto rico. we are externalizing the promotion of tourism in puerto rico and the promotion of investment in puerto rico. we are doing all of the right things. we are being very aggressive and very bold. there are some areas such as health care where even if we make those reductions, there is still a gap, and what we are stating is, different on the previous narrative, what we are saying is, we will show you all that we are doing, but there are --e areas kevin: can you guarantee there is not going to be a bailout? gov. rosello: i don't think there are the votes in the congress to give a bailout. to make sure that we have a fiscal plan that is effective, but there is also a responsibility from congress.
we are american citizens in puerto rico. we deserve that respect. when it comes to a matter such as health care, we need to take a consideration. that is number one. number two, for every citizen that lives in puerto rico and moves to the states, it costs of the federal government and states three times as much to maintain and attend to that citizen. it is a practical matter. it is a beneficial matter. like i said, you will be morepressed to find a rigorous fiscal agenda, more aggressive, more bold in the united states than what we have done, and we are committed to pushing forward so we can have great results. we are going joe: to leave it there. thank you so much for coming on bloomberg. back to you in new york. pimm: thanks very much. that was puerto rican governor oh ricardo rosello.
lisa: happening right now, just to remind you, white house press secretary sean spicer is giving his daily press briefing. you can watch that right now on tv . he is saying there will be a tax plan in the next few weeks. the trump administration is studying the border tax concept, and trump wants a tax policy that boosts u.s. manufacturing. and also,his again, it tax system that encourages companies to stay in the u.s. this is bloomberg. ♪
lisa: the professor of finance at the nyu's stern school of business, still with us. i would like to talk tesla. tesla burned through nearly $1 billion of cash in the fourth quarter. at what point to investors have some positive cash flow, if not a flatlining before they lose patience for this company? this is the ultimate story
stock, a stock you buy because you like the story and the person telling the story. if you believe in elon musk, you are buying tesla. this is where the moment of reckoning is going to come. what other car company would announce a car that is not going to come out in two years, and 400,000 people put $5,000 down to get the car? they've got this rabid customer base. deliver?s, can they that has always been the weakness. they have great vision, but nuts and bolts stuff, they seem to have trouble. joe: it's pretty clear that the current math of the company is not that impressive. the story, as you say, is incredible. more of anight be impressive salesman and steve jobs. steve jobs. how do you put a number on the
story? >> what they are going after is a really big market. i like the online advertising market. we can talk about ceilings in the market. this market is immense, and they are blessed with the competition they have. for whatever reason, automakers, because of legacy decisions, seem to be mired in the way they make things. there is that potential. to deliver, they have to start doing the stuff you need to do to get the cars out of the assembly line. the way i described tesla is that it's a technology company with a capital investment requirement, which is unusual. lisa: they are blessed because of their competition being so poor? that's amazing. [laughter] you don't think pimm: the chevy fold is going to be something that command's market share, or it's been reviewed as having a pretty good build quality. >> you look at gm. you look at ford. it's not that the management is bad, but i think they are
handicapped i decisions made 10, 20, 30 years ago. pimm: maybe they are handicapped by trying to make a profit. elon musk owns 20%. >> the reality is automobile companies do not profit, even on the automobile front. pimm: you don't think ford will be able to transition to electric? >> he will try, but i don't think he will succeed. there are too many things he's dragging along. joe: last time you value tesla, you put the stock around $150 to her that 150 number hasn't changed for you? >> one of these days, i will own tesla. it's not today. i like the company's potential, but at 250, it's out of my reach. joe: thank you for coming on, professor of finance at nyu stern school of business. the market close is next. here are the major averages with
stocks extending their string of games, dow jones on track for the 10th consecutive record close. pimm: i am pimm fox. joe: we want to welcome you to the closing bell coverage. if you are tuning in live on twitter, catches your every weekday from 4:00 to 5:00 p.m. eastern. pimm: we begin with market minutes. , a record high, dow jones adding more than 33 points and s&p 500 a gain of less than one point and the nasdaq down about 4/10 of a percent. s&p 500 off the lows of the day reach just before lunchtime on wall street, stocks moved higher, s&p at the record. joe: turning to the green at the last second. pimm: a lot of buying.
shares of tesla down 7.5% after the company reports its results but says it may need a lot more money in order to complete its buildout of the new model 3. l rams, the parent company of pictorial secret -- they for you secret, not a good day, more than 15%, the company struggling to maintain its growth record and same-store sales results, l brands down more than 15%. lisa: s&p struggling a little bit, just missing the record close. you have constellation brands. brands, theylation are the parent company of corona, buying that in the united states, this is the company responsible, constellation brands down 4%, this comes late in the day, having to do with a conference
perhaps reporting results and talking about a potential border tax because where is the beer for corona coming from -- across the border in mexico. constellation brands down more than 4%. lisa: i was looking at secretary of the treasury steve mnuchin talked about possibly issuing 100 year and 50 year bonds. in this chart we have in front of us, this is the spread between five and 30 year treasury yields, the gap you see a climbing around 8:00 as steve mnuchin gave his comments, seriously considering issuing the bonds come interesting to see bond traders try to price in this potential ultralong issuance, also interesting because i was looking at the german two-year yield, hitting another record low as people increase their expectations. comesfascinating when it
at a time when the inflation outlook is actually improving in germany and throughout europe and people are starting to talk about ecb stimulus. joe: let's look at the currency market, interesting stuff, bloomberg dollar index pulling back a little bit, down .34%, on the flipside the euro one of the winners, a little bit of a relief in europe thanks to what is happening in france, some slightly better poll numbers for macron and news yesterday that .he moderate will endorse him a tiny bit of a relief in europe, not dramatic. currencycalling a which people debate, it touched a new record high at one point over 1165, despite negative chatter out of china over the last month after a crackdown -- about a crackdown. commodities, big ones, crude
$53,everyone we say $62, today is $54, copper futures gold of down 3.3% and 1.3%, some of this safe haven bidding is still there in the market. buying of treasuries and general concerns, gold had a very nice day, up one pointer present. those are the market minutes. lisa: let's look at the bloomberg and you can find all the following chart using the function at the bottom of your screen. let's look at the u.s. german yield spread, this is a story that is fascinating to me, i am looking at the two-year yields in the u.s. yielding the most relative to similarly dated german bonds since 2000,
highlighting how the growth outlook in the u.s. has improved so much relative to germany and .he diverging monetary policies something to watch and an amazing trajectory since the election. pimm: an attorney richard -- joe: i expect the euro getting closer to parent may overlaid nicely on that chart. let's go to the u.s., a lot of enthusiasm about inflation and wage growth, but here is the atlanta fed wage growth tracker, another measure of tracking wages come average hourly ,arnings, employment cost index the electoral waste growth tracker tries to adjust for changes in demographics and how that may affect it. --took a notable down to important to bear in mind that there is always a lot of noise, they never want to react too much to one number but other numbers have been a little bit of on the way to step so something to watch. nothing to panic about but it will be interesting to see if
some of the momentum on wages face, especially -- phase, especially as the fed the closer to a rate hike. pimm: i want to talk about general motors, the chart of general motors, compared to the stock performance of fiat chrysler, let's do fear lines first. automotive performance, ford, fiat chrysler and gm, the context being that gm is in negotiations with psa to purchase gm's european operations and today a u.k. minister meeting with the chief executive of psa to determine the pension liability that may prevent or may help the deal actually be consummated. let's look at the pie chart, key business metrics, if you want to look at where gm operations, you take a look at international operations, take a look in south america, european operations,
let's make it happen. --a: getting breaking news carry on. pimm: there it is. opel, the continental rent for gm, and the bread in the united kingdom, have not been a moneymaker for general motors and about 12% as a result of their sales. hp enterprise reporting earnings fourth quarter -- this quarter earnings per share at $.45, versus estimated $.44, it beat their first quarter net revenue, $11.4 billion, this was a miss versus the estimated $12.1 billion. hpe sees euro had adjusted earnings per share at $1.88 to $1.98.
pimm: not good and the shares down nearly 5%. joe: the stock tumbling. what did you miss? donald trump called two dozen prominent corporate executive to the white house today to advise the of ministries and on taxes, regulation, and infrastructure. our chief washington arrespondent caught up with ceo earlier about why infrastructure should be a key issue. >> top priority, if you look at the economic impact of infrastructure, literally 100 basis point kind of impact on annualized gdp per year. regulationsing up for the companies so they can add more people and invest more aggressively, regulation will have a huge that the regulation will have a huge impact. what is the potential impact for donald trump's agenda on the infrastructure, less that let's ask our bloomberg reporter, infrastructure,
president trump talking to the manufacturing and infrastructure ceos and the stocks themselves had a bad day on fears that the legislative calendar with its big stimulus, people have been excited about since the ninth of february -- november 8, will take a while, what are you seeing down there in terms of when we will get some real meat behind the rhetoric? >> right, earlier today we saw a report from a new startup in washington, d.c. that were looking at the legislative calendar, it could be one or two years before we see congress tried to grapple with big infrastructure. donald trump over the campaign promise a trillion dollars but he has to do with other priorities, including the repeal and replace of the affordable care act, his big tax reform project. lining those things up at realistically looking at how congress will work through those things, it looks like this is not a move to the back of the
line but certainly will not happen as quickly as donald trump may have liked. lisa: what are you hearing from republican congressman as far as infrastructure spending and where that falls into their list of priorities? warinessis some real around some republicans about how this will be case for. they support donald and want to help him achieve his goals but this is a party that for the better part of the last decade has really opposed any spending that was not paid for elsewhere. donald trump is proposing as much as $1 billion in spending. a plan that could actually garner some a bipartisan support from democrats and bring them over to the side. without some movement on capitol hill, i think that is telling why this is not one of the top priorities right now. joe: why isn't it? doesn't everybody like new bridges and roads. that crazy are not about deficits and debt but they
are in power so they are supposed to forget about that, why not just build a much of bridges and roads, wises or -- why is it so hard? traditionally does the republican party but we have seen polarization as we get these tea party conservatives, hartline republicans and people who are fearful they will be facing primary challenges in their districts from even harder right republicans or conservatives that say you are spending without paying for it. you are seeing resistance that has not happened in the past. it used to be a bipartisan consensus and move from one president to the other and one congress to the other but now it is organized. story as itatch the develops because a lot is riding on it in the market. thank you. lisa: we want to bring you up-to-date on to let private enterprise, shares -- hewlett-packard enterprise, estimatesmissing earnings and revenue, the second
quarter earnings per share $.41, the estimate was seven cents, you have seen net revenue missing. pimm: results from nordstrom. the stock moving higher by about 4%, the company reported fourth-quarter results that exceeded analyst estimates, 137 versus the estimate of 115 but they did miss on revenue, 4.32 versus three 4. down, so far,es investors enjoying what they are reading about nordstrom, shares of by nearly 4%. this is bloomberg. ♪
>> time for first word news. betsy devos is defending the covenant ministries and decision to rescind -- the problem administration -- the thesgender decision, associated press poll's are as saying the policy is an example of the obama administration overreach. the government told schools to allow transgender students to use bathrooms consistent with their gender identity. the secretary says her approach is to put as much control as possible into state, local, and parental hands. france far right president candidate says she is just like theresa may who is taking her country out of the european union. marine le pen says in the interview that prime minister may is running the u.k. with policies she would implement as
president. marine le pen is the front runner in first-round opinion polls but surveys see her losing in the runoff. a group of syrians whose relatives have either been attained by president bashar al-assad or disappeared met with the human envoy to syria in geneva today. peace talksyrian between the warring sides of the conflict were to resume, the relatives want the fate of the missing to be discussed in the new syrian peace talks. global news 24 hours a day, powered by more than 2600 journalist and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. pimm: thank you. let's get a check of the stock of gap, company reporting results after market close, it exceeded analyst estimates by a penny, previously given guidance for the fourth quarter, they reported earnings per share of
$.51, previously guided between $.50 and $.51 with sales a little bit higher than estimates, $4.3 billion versus $4.39 billion, most investors will be looking at what the company says about its outlook or the 2017 because a lot of this has been baked in, they had been given guidance and showing they can recapture some of the sales they have been losing. lisa: bill ackman is pretty happy, herbal life posted first quarter expectations that were below estimates and fiscal year 2017 adjusted earnings per share well below the consensus, you see herbalife shares more than 3% in after-hours trading in response to these earnings. seatac -- cpac day one, writes free press and steve bannon spoke about president promotingmp's record
his future agenda, and talking about the media. >> it will get worse every day and here is why, the internal logic makes sense, their corporatist, globalist media that are adamantly opposed -- [applause] >> to an economic nationalist agenda like donald trump has. joe: for more let's bring in kevin, the bloomberg news chief washington correspondent, we do not hear from steve bannon that much but that is what we expect, slamming the globalist, corporatist media who do not get nationalism. what do these words mean? >> what i was looking at was who was on that stage with steve bannon, the chief strategist for president trump and that is the chief of staff, there have been widespread rumblings about whether or not steve bannon and the chief of staff get along. seeing them get along on the state was a clear signal from the white house that they are
trying to get on the same page to put behind them any discussion of them not being in agreement as this president wants to go across town to capitol hill on tuesday to deliver a joint address to congress to begin crafting work on his policy agenda. lisa: building on that, there needs to be or i would think the president would want to appeal to a merging of the more extreme part of the republican party or some of the far right wing and the more centrist conservatives. do we expect to hear in all of branch extended when donald trump speaks? >> policy areas, particularly on tax reform, republicans are divided on the issue of the border adjustment tax, paul ryan and corporations like boeing field this is a source of revenue that could generate more than $1 trillion to help with other tax cuts and senator caught in and senator purdue who
feel they are more aligned with the retail industry, groups like walmart and walgreens which were at the wall hurt -- white house the other data feel this is the white -- not the way to go with tax policy but mick mulvaney who was a tea party conservative will find himself directly at art with people like treasury secretary steve mnuchin and gary cohen as they find more of a moderate economic approach. a lot of moving parts and a lot of things in motion. you are right to suggest that tomorrow we could get some more clues. i think president trump will take tomorrow as an opportunity to echo sentiments we heard today from steve bannon and the chief of staff and will wait until tuesday and the joint session to congress to lay out the roadmap for the policy standpoint. >> what did you learn from the governors today? the governor of kansas sam brownback was speaking and doug ,ucey, the governor of arizona
what is their take on what will happen with spending and how that relates to their budget? >> they would like more power, a table when it the comes to repealing parts of the affordable care act, when it comes to infrastructure, let's not forget that the top ceos of the manufacturing industry were at the white house earlier today meeting with people like jared kushner and president trump and gary cohen and steve mnuchin, vice president mike pence as well. they are trying to figure out when president trump is able to put forth that infrastructure plan, by the likes of steve bannon, not an appetite in congress for it to look for the demonstration to utilize governors to begin to see if they are able to get a seat at the table to direct those. pimm: thank you -- lisa: thank you for the update. the chief washington correspondent. president trump will take the cpac speaks tomorrow, watches reports live on bloomberg markets at 10:00 a.m. eastern.
♪ lisa: let's look into the bloomberg and you can't buy all the following chart using the function at the bottom of your --sh at all of the charts and you can look at all of the chart using the function at the bottom of your screen. the price of wind power in germany versus wind output, the wind output is the white line, wind output has been increasing dramatically, germany is the center of wind power in europe and asked the production goes up and the output goes up, day
ahead prices for power dropping. fascinating because it highlights how wind power and solar energy have entered the fray as a competitive energy source that is competitive on a price level. joe: some of my favorite -- pimm: some of my favorite data. i am looking at u.s. data a little more normal. i have probably shown this chart 25 times, it never ceases to amaze, jobless claims going back the last 10 years, nonseasonally adjusted which is the white light which keeps spiking for the holidays, the blue line smooths it out, the 52 week moving average gets the smooth the trend, at a new post crisis down, down,e goes down, almost no lift up at any point in seven years. one of the most remarkable trends in the u.s. economy and continue today. pimm: breaking news from the
department of justice affecting the private prison industry, the department of justice has rescinded the ban that was put in place by the obama administration barring the use of private prisons. cxw,ing at stocks, geo and let's pull up a chart. we will get to that. when that went into effect during the obama administration, many stocks just cratered as a result of the move. w up 3.3% after hours on news of this. lisa: a big deal for them, a complete overhaul to the model and you will probably see an old going reaction -- ongoing reaction as you will see how many prisoners will be moved to for-profit prisons. >> this is interesting because it shows that you do not know what can happen.
many people have speculated this would be a movie trump administration would make but the fact that you are getting these memorandums from the various government agencies from immigration, in this case tried prisons, this is what moves markets. >> this was anticipated prior to trading undercxw $15 a share and it jumped over $20 after donald trump one and climb since then -- won and climbed since then. investors got pulled up --bulled -- bulled up after donald trump one. --won. >> president trump's top cap individuals now an orderly approach when it comes to mexico and expelling what could be millions of undocumented immigrants -- people, we will tell you how this went off with mexican officials, details. this is bloomberg ♪.
♪ >> it is time for first word news there presidential counsel kellyanne conway told members of is athat president trump generous and compassionate leader who brings decisive action to the white house. she added that the president has sacrificed in her words might really to serve in the white house. she said of other females that a lot of women in the united states have "a problem with women in power." donald trump considering nominating u.s. bancorp ceo richard davis to the federal reserve board. according to a person familiar with the matter, davis who has announced he plans to retire as chief of the minneapolis-based
bank later this year as a contender to fill one of three vacancies at the fed. more than 1000 migrants have been rescued in the mediterranean sea in just two days, according to the associated press. they say many more are expected to attempt the journey from africa or the middle east before the end of winter, the international organization for migration says more than 13,000 people have arrived by sea this year alone and 272 reportedly died this year tried to make the crossing. mexico's foreign minister says that one of the main concerns his government has with regard to the trump administration is that the human rights of mexican living in the u.s. are not respected. he spoke during a press tillerson said he planned to meet with the mexican president, the first
international trip of the trump administration envoy to mexico. global news 24 hours a day, powered by more than 2600 journalist and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. pimm: thank you. let's get a recap of the market action, looking at the dow jones industrial average, a record, up more than 34 point and the s&p 500 just shy of a record, less than a point of anydown for tense of a percent, lower by more than 25 points. breaking news, the department of justice has reversed the position from the obama administration having to do with the use of private prisons and the shares as a result of publicly traded prison companies moved higher. corrections corporation of more upn two point -- 2.5% --
more than 2.5%. lisa: to put this in perspective , the u.s. house is 23,000 federal inmates in private prisons, 12% of the entire federal population in prisons, this is a big deal. pimm: and it speaks to the issue of the role of private prison corporations in the criminal justice system and they were big supporters of president donald trump during the campaign. afterwards for the inauguration also. lisa: recapping earnings, hewlett-packard enterprise lower right now by more than 6% after missing their earnings, nordstrom is higher, they beat and the chinese web midst butompany baidu the shares in after our -- missed but after our share of trading up.
hours share of trading up. joe: what did you miss -- for more on the rise in tengion between the u.s. and mexico over president trump's hard-line stance over deportation and immigration, our international and economics and policy correspondent michael mckee joins us from mexico city where he listened to the remarks by rex tillerson, the secretary of state and his mexican counterpart. michael: the u.s. delegation has just finished his trip to mexico city, wrapping up a meeting in the last few minutes with the mexican president, a meeting we are told almost did not happen because of the strain session earlier today, not talking about trade that about border security. secretary tillerson and kelly getting in your pull from their mexican counterparts as the minister at interior minister
said they are not on board with the law -- wall and not on board with the effort to expand deportation. reportersson telling today that about the only thing they agreed on was that they disagreed. that jointly acknowledged in a relationship filled with vibrant colors, too strong sovereign countries from time to time will have differences. underscoring their differences today, the president --the white house saying describing the recent dhs rate as military operations, followed by kelly telling reporters there would be no military involvement in operations. kelly took issue with what he got news media misreporting of what the deportation orders say. that there will be -- there will be no mass deportations, everything we do will be done legally and the
unit does according to human rights and the legal justice system of the united states. that was welcomed by the mexicans by either side to get much closer than that during the session and they agreed that they should continue to meet but did not set a date or a time or place for the next round of meetings. lisa: when will the meeting be next about new negotiating nafta and do you have a sense of whether candidate will be involved, three-part negotiations with mexico and the u.s.? it sounds like they will have to do a lot of work on the security front first. stephen earlier today and the mexican economy minister said that they probably will not get to nafta or trade talks until sometime later this year. possibly not until 2018. that seems to have slipped down the ladder and it is not clear what donald trump will do but it
is clear that neither side is ready to move on to trade yet. they are still very busy with the security aspects of everything. pimm: the foreign minister of mexico was vigorously the finance minister. he was botted from the the -- booted from the position because he was -- he set up the meeting with the then candidate donald trump with the mexican president, he understands currency, changes, the mexican peso down 7.5% versus the dollar, what is his role in this? michael: he is the point man for mexico's anger. you have to realize that he did lose his job over the meeting with donald trump earlier. he has to take a strong line that isthe u.s. and made easier by the fact that many mexicans are angered by the u.s. position on immigration and the wall. he has public support as does the president.
at this pointgure and he will remain so as long as border security is issue number one. joe: i controversial thing in the last couple of days is the idea that people are trying to come across the border who are not mexican, maybe from further south in central america, they will be deported to mexico, how will this work operationally, and what is the mexican government -- will they address this change of policy? michael: nobody knows how it works operationally and the mexicans are afraid the u.s. will start dumping people on the border, creating refugee camps and that is totally unacceptable for them. the number of mexicans that across u.s. borders in years have the client precipitously and the number of central american immigrants who have tried to cross the border has risen, mexico has been doing its best to turn those people back, turning back several hundred thousand and they say if the u.s. does not cooperate on security measures and pushes them too hard on trade, they may
let them through and creating another humanitarian crisis and a real headache of u.s. lisa: a lot to keep track of, , our you michael mckee international economics and policy correspondent reporting from mexico city. joe: coming up, insight on chinese debt and currency policy and the professor senior fellow at the carnegie endowment for international peace. this is bloomberg. ♪
globalization and free freight in a obvious counter message to president trump, a basic question, is there a role for china to step up and fill the gap the u.s. may leave behind if it retreats on trade? i posted that question to economist michael pettis in beijing, a professor at peking university and a senior fellow at the carnegie endowment for international peace. michael: the u.s. centered global trading system is built around u.s. deficits significant u.s. deficit which is what the world wants, it wants to run surpluses whereas china is running fairly large surpluses, and it is difficult for china to bring the surpluses down in a hurry. if we could imagine a seamless switch from a u.s. centered global trading regime to a china center global trading regime, that would be the equivalent of roughly two to 2.5% fiscal contraction in all of those other countries which is
something i do not think anybody wants to bear. joe: is there an opportunity in this moment, however, for china to read accelerate -- re-accelerate it economy, people have been talking about moving away from being export focused giving consumption focused, could this moment be an opportunity to accelerate some of the transitions? china is not really an export focused economy, and investment focused economy. the current account surplus, the trade surplus is the way it resolves the deficient demand domestically. way, a difficult adjustment that china faces, it has to address the debt. one way or another, it will slow down significantly. the importance of the external sector is that a on
accommodating external sector makes the adjustment much more difficult. joe: let's talk about the debt, the chinese economy, the official statistic looks pretty decent lately but people know that that continues to surge, debt growth continues to accelerate, when does that finish? people have been warning about this private sector debt in china for a long time. when is the endgame in terms of its disdain ability -- it's sustainability. michael: they can take years, no signs of when you run out of debt capacity but we do know that in order to achieve and maintain the current growth target, which are around six point seven point annually, china has to increase indebtedness by something like 40 percentage points of gdp, a huge number. the question is -- how many more years can it continue doing this? it could be many more years,
depending on how accommodative the central bank is. this is the important point, within two years to three years we will probably start running in of natural debt capacity which case the only way to keep debt growing is to monetize it, the central bank basically funds the growth. the problem with that is that it is not a free lunch, it is a transfer of wealth. the losers in that case are anyone who is long monetary assets which basically means the household sector. that is the big problem for china. we all know that you have to bring investment down because it is not very productive. if you do not want unemployment to go up, unique consumption to go out and the only way to go that it consumption up is to get household income upo. if you get household to pay for debt, it will not work. joe: the problem with that is
who pays for it if it continues, the obvious part of the national -- national ballot is the household sector but doing that would be at all it's with the direction china wants to go in economically? michael: exactly, how do you resolve a debt problem, get some sector of the economy to pay for it. that is it. n, where do you see the currency going -- yuan, where do you see the currency going, further weakening? what will regulators do about the outflow problem which does not seem to be going away? problemno, the outflow will not go away and we have to be careful when we talk about the renminbi weakening, it has been weakening against the dollar but so has basically everything else. if you look on a trade weighted basis, in the last year or so, the renminbis has not run that week and that is a very explicit
commitment by the central bank. the problem in china, in the country, when you begin the currency, you are effectively transferring income away from consumption towards savings. if you are a country with a savings problem, that may be a good thing, but china has too much savings. the governor of the central bank has made it clear, he is opposed to a weakening of the currency because that reverses the little bit of rebalancing they have done. onlyg said that, you can defend the currency as long as you have reserves and the moment you think you know longer have enough reserves, notably you will run out of reserves, that is the date you allow the currency to depreciate and i do not think china is close to that point. if capital outflows continue anywhere close to this case at some point within a year or so, they will have to seriously
consider alternatives to the current policy. joe: could you see in the short or medium term a straight up free float of the yuan? no, it will be turned determined by politics of the situation but from a policy point of view and an economics point of view, the central that history much opposed to it. i think it would be damaging for the chinese economy. some people say that if you depreciate the currency, capital outflows will stop. that depends on quite money is leaving the country. if money is leaving the country because wealthy chinese think foreign assets are cheap, then depreciating the currency will indeed stop the outflow. if money is leaving the country because of concerns about financial uncertainty, economic uncertainty, political uncertainty, depreciating the currency then will not stop the outflows unless he can eliminate that uncertainty and it is probably -- it will probably
increase the uncertainty rather than eliminate it. joe: that was michael pettis, a professor at peking university and a senior fellow at the carnegie endowment for international peace earlier today from beijing and we will have more of his remarks, this time on u.s. politics, president trump, on tomorrow's show. lisa: next, the barclays ceo jes staley after the firm reported a surge in fourth-quarter fixed income revenue. a check on some after-hours u.s. trading connected to earnings, hewlett-packard continuing its decline down more than 6%, herbal life down and nordstrom up after beating. we will keep you up-to-date as other news comes in. this is bloomberg. ♪
jes staley strategy of doubling down on the firm's investment banking seems to be paying off, the british lender reported fourth quarter revenue that rose and the bank core capital ratio got a better than expected lift. it is the latest bank to report a surge in fixed income activities and earlier today, we spoke to him signaling dissatisfaction with the firm's fixed income sales and trading unit, also known -- >> very happy with our performance. the income credit areas of barclays did very well across 2016. you will notice, if you look at our credit and fixed-income trading across the entire year, we tend to have less data to the market, we tend to have less long-term positions at when a credit market is rallying strongly, slightly underperforming some of the best that tend to have more capital on focused on that business. where we are much more of an
agency profile. in credit markets trade off like they did in the first quarter of 2016, we did very well versus the u.s. competitors. overall, very much like how the investment bank performed, and 2016 -- in 2016, take him in a feed come equity underwriting fees, we were up year-over-year, one of the few investment banks that accomplished that. we think we gained market share in 2016 and we like how we performed in the fourth quarter. commentators and maybe shareholders want to do to be more aggressively shrink or reposition the investment banking part of barclays. you were keen to hang onto it. are you happy with the decision a year into your 10 year, are you happy with the way you have taken the strategy? jes staley: going back to the core of revenues, we ranked fifth in the united states and
2016 which was up from 2015. we were third in the u.k.. we like to progress we made and we very much like the balance of a strong consumer business, particularly in the u.k. where we cap -- have a sitter the position, balance with a wholesale business or a corporate invective -- investment business, anchored in london and new york but with a global presence. we like the balance that gives to our profile as a company and a strategic advantage or barclays -- for barclays. >> progress for your second barclays africa, update on the time horizons, what do you expect to get done win in africa? separating to institutions that have been together for 100 years is a complex thing and we could dowe have reached an agreement with barclays after last quarter on -- africa last quarter on a separation agreement which is
now in the hands of the regulators in the u.k. and across africa. once we get the regulatory approval then we are unfettered in our ability to set down our stake in africa to be consolidated level which is our ultimate goal, we have given ourselves to more years to do that. we will do it when it is appropriate and we find the market accommodative to us. very much we look forward to in a short time having the ability under our control of determining when we will make those sales in africa. even with the expense of separating from africa, that will release about 75 basis point of capital, we had a very strong year and price at 12.4%, you can do the math in terms of 75 basis point plus the 12.4%, this has resolved the issue of -- do we have the capital base we need to manage the bank going forward and i think we do and africa will be an important
♪ >> the dow jones hitting a record smp, just under, and the nasdaq slightly down. tomorrow, the president addresses cpac at 10:00 a.m. eastern. joe: and then home sales data and university of michigan home sales sentiment. results -- a16 jcpenney releases the fourth-quarter earnings. >> that is all for one did you miss
executives of ge, dow chemical and caterpillar. the president charged them with restoring u.s. trade dominance. and the white house chief of staff and steve bannon say they have a great partnership, one that is helping the president the phil his campaign promises. that is after media reports said that they do not get along. they made an appearance today at the conservative political action conference outside washington. and jeff sessions ordering the federal bureau of prisons to continue using private prisons. this is resending in order by the former administration. sessions signed the order on tuesday. privatestopped hiring companies to manage the prison population last year. and the secretary of state rex tillerson and top officials discussed differences between mexico and the united states during meetings today. tillerson spoke after he